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April data indicates another positive month for the Canadian manufacturing sector, with the latest survey pointing to higher levels of output, as well as new business and employment, according to the RBC Canadian Manufacturing Purchasing Managers’ Index (RBC PMI).

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Adjusted for seasonal influences, the headline RBC PMI registered 52.9 in April, down slightly from 53.3 in March but above the neutral 50.0 value for the thirteenth successive month. All five component indices had a positive influence on the RBC PMI in April. The drop in the index since March mainly reflected slower rates of output and new business growth.

Nevertheless, supply chain disruptions persisted, leading to longer delivery times and another rise in work backlogs. Meanwhile, manufacturers noted that input costs were pushed up by the weaker Canadian dollar, which in turn contributed to a solid increase in factory gate charges during the latest survey period.

Manufacturers signalled that growth in production eased for the second month running in April and was slightly slower than the average since the survey began in late 2010. The moderation in output growth reflected a slight slowdown in the pace of new business expansion in April.

Volumes of new work from abroad increased only marginally in April and the rate of expansion eased over March. Companies that reported a rise in new export orders generally cited exchange rate depreciation and stronger underlying demand from the U.S.

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Delivery times from suppliers lengthened in April, which manufacturers attributed to logistics bottlenecks and, in some cases, ongoing disruptions from adverse weather conditions. The latest deterioration in vendor performance was one of the sharpest seen over the past two-and-a-half years. As a result, backlogs of work accumulated for the third month running and some manufacturers sought to increase their pre-production inventories in April. Stocks of finished goods also rose during the latest survey period.

Greater production requirements and resilient confidence about the economic outlook supported job creation across the manufacturing sector. The latest rise in employment levels was the fastest since November 2013, but still slightly weaker than the historical average.

April data indicated a further sharp rise in average cost burdens within the manufacturing sector. The rate of input price inflation eased since March, but was still one of the fastest recorded over the survey history. Meanwhile, the latest survey pointed to a solid rise in factory gate charges, which extended the current period of output charge inflation to eight months. Manufacturers widely linked higher output prices to strong cost inflation in recent months.

Regional highlights include:

  • All regions posted an increase in manufacturing output in April.
  • Quebec was the only region to register a decline in new order volumes.
  • Ontario reported the sharpest lengthening of supplier delivery times.
  • Alberta & British Columbia continued to record the fastest pace of input price inflation.

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Originally published on Advisor.ca

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